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This works OK and both item descriptions are shown as list items on the home page. However I really want to show links in the description (list items) but when I put them in to the RSS file they are ignored. Is there anyway I can do this?

Ok, my bad, it's what you get when you don't test...
1) The root element of the xml is not <channel>, but <rss>
2) select="item[position() < 4]" is bound to fail, because of "<". the correct syntax is select="channel/item[position() &lt; 4]"